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How Much Does the Average American Pay in Taxes?
Here's a look at what the average American family pays in taxes each year. How do you compare?
Brian Feroldi
(TMFTypeoh)
Mar 14, 2017 at 8:43AM
The American tax season is in full swing, which means that millions of U.S. citizens have already written a painful check to the government. Curious to know how much the average American family pays in taxes each year? Below are some numbers that can help to answer that question.
Federal taxes
According to the IRS, Americans filed more than 150.6 million tax returns in 2015. During that year they also earned $10.17 trillion in adjusted gross income and had a total tax liability of $1.45 trillion. Some quick division means that the average gross income per return was $67,564 while the average federal tax hit was $9,655. That gives the average American family a federal tax rate of 14.3%.
However, the above figures above can be a bit misleading. Many low-income Americans actually have a negative federal tax bill thanks to the Earned Income Tax Credit. If you remove those returns from the equation then you are left with 99 million Americans who recorded an average federal tax hit of $14,654.
Social Security and Medicare Taxes
Almost every employee in the U.S. knows that their employer automatically takes a small bite out of their paycheck to cover Social Security and Medicare taxes. What they might not know is that these automatic taxes are deducted regardless of citizenship or residence. That means that some U.S. employees are paying these taxes even though they might not be qualified to collect social security or Medicare benefits down the road.
If you've ever looked at your own paycheck and done the math, you might guess that the social security tax rate is 6.2%. That's true, but you might not be aware that your employer is also charged an additional 6.2%. Thus, the total social security hit is actually 12.4%.
It is worth noting that some Americans actually pay less than the 6.2% rate. The reason is that the IRS sets a cap on the total amount of social security taxes that can be collected from an employee in a given tax year. For 2017, the maximum wage that's subject to social security tax is $127,200. Therefore, anyone who earns more than that figure will pay less than 6.2% on a percentage basis since they exceed the cap.
Turning to Medicare, the assessed rate is 1.45% for both employees and employers, which means that the total tax hit is another 2.9%. However, if you make more $200,000 in a calendar year, your employer is responsible for withholding an additional 0.9% in additional Medicare taxes, regardless of your filing status. Unlike social security taxes, there is also no upper limit on the amount of taxes that can be collected.
State and local income taxes
In contrast to the three taxes listed above, state and local income tax rates can vary widely based on where you live. As an example, seven states do not charge their residents any income tax at all. Meanwhile, high-income earners in California can be charged up to 13.3%!
Despite the wide range, estimates from the U.S. Census Bureau show that the average state and local income tax rate is about 9.9%.
How Much Does the Average American Pay?
With the huge caveat that the figures calculated above are highly variable from person to person, if you add the four income-based tax rates together you get a total tax rate of 31.85%. Multiply that rate by the average gross income per return and you get a grand total of $20,944.
Of course, you are likely aware that this figure still doesn't tell the whole story. We haven't even discussed a number of taxes that millions of Americans are subject to such as property tax, vehicle tax, sales tax, and more. Still, if you are looking for what the average American pays in taxes, I'd argue that figure is about $20,944, give or take.
1111111111111111111111
What does the government spend your tax dollars on? Social insurance programs, mostly
BY DREW DESILVER
It’s springtime, which means the start of the budgeting process for Congress and a mad dash for many Americans to file their income taxes. That makes it a good time to look at the federal government’s spending habits in a broader context than just this year’s battles.
When thinking about federal spending, it’s worth remembering that, as former Treasury official Peter Fisher once said, the federal government is basically “a gigantic insurance company,” albeit one with “a sideline business in national defense and homeland security.” In fiscal year 2016, which ended this past Sept. 30, the federal government spent just under $4 trillion, and about $2.7 trillion – more than two-thirds of the total – went for various kinds of social insurance (Social Security, Medicaid and Medicare, unemployment compensation, veterans benefits and the like). Another $604 billion, or 15.3% of total spending, went for national defense; net interest payments on government debt was about $240 billion, or 6.1%. Education aid and related social services were about $114 billion, or less than 3% of all federal spending. Everything else – crop subsidies, space travel, highway repairs, national parks, foreign aid and much, much more – accounted for the remaining 6%.
It can be helpful to look at spending as a share of the overall U.S. economy, which provides a consistent frame of reference over long periods. In fiscal 2016, total federal outlays were 21.5% of gross domestic product, or GDP. For most of the past several decades, federal spending has hovered within a few percentage points above or below 20%. The biggest recent exception came in the wake of the 2008 mortgage crash: In fiscal 2009, a surge in federal relief spending combined with a shrinking economy to push federal outlays to 24.4% of GDP, the highest level since World War II, when federal spending peaked at nearly 43% of GDP. (We relied on archived historical data from former President Barack Obama’s final budget for our spending data; President Donald Trump’s initial budget proposal doesn’t include any historical data.)
What on earth is PEW Research told compared to what I see? The Defense budget is a horrible 50 percent and this table (that did not show up) shows 15 percent. I also looked at this about four years ago which was 2015.
THE BUDGET MESSAGE OF THE PRESIDENT To the Congress of the United States:
In just over 2 years, together with the American people, we have launched an unprecedented economic boom. Since I was elected, we have created more than 5 million new jobs, including half a million manufacturing jobs. Nearly 5 million Americans have been lifted off food stamps. Unemployment is the lowest in nearly half a century. African American unemployment, Hispanic American unemployment, and Asian American unemployment rates have all reached historic lows. Our Nation is experiencing an economic miracle—and it is improving the lives of all our citizens.
We have achieved these extraordinary gains thanks to historic tax cuts and an unprecedented regulatory reduction campaign, through unleashing American energy production, systematically fixing bad trade deals, and remaining absolutely committed to putting the needs of the American worker first.
My Administration worked with the Congress to pass unprecedented legislation to confront the opioid crisis, a sweeping new farm bill, groundbreaking criminal justice reform, major investments to rebuild the military, and historic Department of Veterans Affairs reforms to ensure that our great veterans have access to high quality healthcare.
We are also making our communities safer. To target violent crime, my Administration has increased support for Federal, State, and local law enforcement. We have added nearly 200 new violent crime prosecutors across the United States. And last year, the Department of Justice prosecuted more violent crimes than ever before. As a result, violent crime is falling.
My Administration is confronting the national security and humanitarian crisis on our southern border, and we are accepting the moral duty to create an immigration system that protects the lives and jobs of our citizens. This includes our obligation to the millions of immigrants living in the United States today who followed the rules and respected our laws.
In the 20th century, America saved freedom, transformed science, and defined the middle class standard of living. Now we must write the next chapter of the great American adventure, turbocharging the industries of the future and establishing a new standard of living for the 21st century. An amazing quality of life for all of our citizens is within reach. We can make our communities safer, our families stronger, our culture richer, our faith deeper, and our middle class bigger and more prosperous than ever before.
We are now addressing our challenges from a position of strength. My 2020 Budget builds on the tremendous progress we have made and provides a clear roadmap for the Congress to bring Federal spending and debt under control. We must protect future generations from Washington’s habitual deficit spending.
This year, I asked most executive departments and agencies to cut their budgets by at least 5 percent. In addition to reflecting those reductions, my Budget invests in the following priorities:
Securing our Borders and Protecting our Sovereignty.
As President, my highest duty is the defense of our Nation—which is why finishing the border wall is an urgent national priority. All who are privileged to hold elected office must work together to create an immigration system that promotes wage growth and economic opportunity, while preventing drugs, terrorism, and crime from entering the United States. Immigration policy, like all policy, must serve the interests of Americans living here today—including the millions of new Americans who came here legally to join our national family. The American people are entitled to a strong border that stops illegal immigration, and a responsible visa policy that protects our security and our workforce. My Budget continues to reflect these priorities, and I look forward to working with the Congress to finish the border wall and build a safe, just, and lawful immigration system that will benefit generations of Americans to come.
Preserving Peace through Strength.
A strong military, fully integrated with our allies and all our instruments of power, enables our Nation to deter war, preserve peace, and, if necessary, defeat aggression against United States interests. To that end, my Budget requests $750 billion for national defense, an increase of $34 billion, or 5 percent, from the 2019 enacted level. The Budget funds the National Security Strategy and National Defense Strategy, building on the major gains we have already made throughout the world.
Protecting our Veterans.
Our Nation’s brave warriors and defenders deserve the best care America has to offer—both during and after their active service. Last year, I signed into law the historic VA MISSION Act of 2018 to reform and transform the Department of Veterans Affairs healthcare system into an integrated system for the 21st century. My Budget fully funds all requirements for veterans’ healthcare services and provides additional funding to implement the VA MISSION Act of 2018.
Investing in America’s Students and Workers.
To help protect taxpayer dollars, my Budget continues my request to create an educational finance system that requires postsecondary institutions that accept taxpayer funds to have skin in the game through a student loan risk-sharing program. My Administration will also continue to seek expanded Pell Grant eligibility for high-quality, short-term programs in high-demand fields, so that students and workers can quickly gain valuable skills at a more affordable cost and obtain family-sustaining jobs. We must create and invest in better opportunities for our Nation’s students and job seekers, while ensuring that we do so in a more efficient and effective manner.
Research for Childhood Cancers.
Many childhood cancers have not seen new therapies in decades. My Budget initiates a new effort that invests $500 million over the next 10 years to support this critical life-saving research.
Defeating HIV/AIDS in America.
The HIV epidemic still plagues our Nation, with more than 38,000 Americans infected every year. In response, my Budget provides $291 million to the Department of Health and Human Services to defeat the HIV/AIDS epidemic. The goal is to eliminate most new infections within 5 years (75 percent) and nearly all within 10 years (90 percent). This initiative will focus efforts on diagnosis, prevention, and treatment efforts in the locations where intense transmissions of the virus are driving the epidemic. Confronting the Opioid Epidemic. My Budget continues historic levels of funding for our law enforcement, prevention, and treatment efforts to combat the opioid and drug addiction epidemic.
THE BUDGET FOR FISCAL YEAR 2020 3
Supporting Working Families. America must also lead in supporting the families of our workforce so that they can balance the competing demands of work and family. My Budget includes a one-time, mandatory investment of $1 billion for a competitive fund aimed at supporting underserved populations and stimulating employer investments in child care for working families. My Administration has also pledged to provide paid parental leave to help working parents, and we are committed to partnering with the Congress to enact this important policy.
We must always strive to uphold our oaths to promote and protect the personal and economic freedoms the Constitution guarantees to us all. We must work together to renew the bonds of love and loyalty that link us to one another—as friends, as citizens, as neighbors, as patriots, and as Americans. My Budget reflects my Administration’s commitment to these worthy goals as it seeks to make the United States of America wealthier, stronger, safer, and greater for every American family and neighborhood.
DONALD J. TRUMP
The White House, March 11, 2019
How Much Does the Average American Pay in Taxes?
Here's a look at what the average American family pays in taxes each year. How do you compare?
Brian Feroldi
(TMFTypeoh)
Mar 14, 2017 at 8:43AM
The American tax season is in full swing, which means that millions of U.S. citizens have already written a painful check to the government. Curious to know how much the average American family pays in taxes each year? Below are some numbers that can help to answer that question.
Federal taxes
According to the IRS, Americans filed more than 150.6 million tax returns in 2015. During that year they also earned $10.17 trillion in adjusted gross income and had a total tax liability of $1.45 trillion. Some quick division means that the average gross income per return was $67,564 while the average federal tax hit was $9,655. That gives the average American family a federal tax rate of 14.3%.
However, the above figures above can be a bit misleading. Many low-income Americans actually have a negative federal tax bill thanks to the Earned Income Tax Credit. If you remove those returns from the equation then you are left with 99 million Americans who recorded an average federal tax hit of $14,654.
Social Security and Medicare Taxes
Almost every employee in the U.S. knows that their employer automatically takes a small bite out of their paycheck to cover Social Security and Medicare taxes. What they might not know is that these automatic taxes are deducted regardless of citizenship or residence. That means that some U.S. employees are paying these taxes even though they might not be qualified to collect social security or Medicare benefits down the road.
If you've ever looked at your own paycheck and done the math, you might guess that the social security tax rate is 6.2%. That's true, but you might not be aware that your employer is also charged an additional 6.2%. Thus, the total social security hit is actually 12.4%.
It is worth noting that some Americans actually pay less than the 6.2% rate. The reason is that the IRS sets a cap on the total amount of social security taxes that can be collected from an employee in a given tax year. For 2017, the maximum wage that's subject to social security tax is $127,200. Therefore, anyone who earns more than that figure will pay less than 6.2% on a percentage basis since they exceed the cap.
Turning to Medicare, the assessed rate is 1.45% for both employees and employers, which means that the total tax hit is another 2.9%. However, if you make more $200,000 in a calendar year, your employer is responsible for withholding an additional 0.9% in additional Medicare taxes, regardless of your filing status. Unlike social security taxes, there is also no upper limit on the amount of taxes that can be collected.
State and local income taxes
In contrast to the three taxes listed above, state and local income tax rates can vary widely based on where you live. As an example, seven states do not charge their residents any income tax at all. Meanwhile, high-income earners in California can be charged up to 13.3%!
Despite the wide range, estimates from the U.S. Census Bureau show that the average state and local income tax rate is about 9.9%.
How Much Does the Average American Pay?
With the huge caveat that the figures calculated above are highly variable from person to person, if you add the four income-based tax rates together you get a total tax rate of 31.85%. Multiply that rate by the average gross income per return and you get a grand total of $20,944.
Of course, you are likely aware that this figure still doesn't tell the whole story. We haven't even discussed a number of taxes that millions of Americans are subject to such as property tax, vehicle tax, sales tax, and more. Still, if you are looking for what the average American pays in taxes, I'd argue that figure is about $20,944, give or take.
1111111111111111111111
What does the government spend your tax dollars on? Social insurance programs, mostly
BY DREW DESILVER
It’s springtime, which means the start of the budgeting process for Congress and a mad dash for many Americans to file their income taxes. That makes it a good time to look at the federal government’s spending habits in a broader context than just this year’s battles.
When thinking about federal spending, it’s worth remembering that, as former Treasury official Peter Fisher once said, the federal government is basically “a gigantic insurance company,” albeit one with “a sideline business in national defense and homeland security.” In fiscal year 2016, which ended this past Sept. 30, the federal government spent just under $4 trillion, and about $2.7 trillion – more than two-thirds of the total – went for various kinds of social insurance (Social Security, Medicaid and Medicare, unemployment compensation, veterans benefits and the like). Another $604 billion, or 15.3% of total spending, went for national defense; net interest payments on government debt was about $240 billion, or 6.1%. Education aid and related social services were about $114 billion, or less than 3% of all federal spending. Everything else – crop subsidies, space travel, highway repairs, national parks, foreign aid and much, much more – accounted for the remaining 6%.
It can be helpful to look at spending as a share of the overall U.S. economy, which provides a consistent frame of reference over long periods. In fiscal 2016, total federal outlays were 21.5% of gross domestic product, or GDP. For most of the past several decades, federal spending has hovered within a few percentage points above or below 20%. The biggest recent exception came in the wake of the 2008 mortgage crash: In fiscal 2009, a surge in federal relief spending combined with a shrinking economy to push federal outlays to 24.4% of GDP, the highest level since World War II, when federal spending peaked at nearly 43% of GDP. (We relied on archived historical data from former President Barack Obama’s final budget for our spending data; President Donald Trump’s initial budget proposal doesn’t include any historical data.)
What on earth is PEW Research told compared to what I see? The Defense budget is a horrible 50 percent and this table (that did not show up) shows 15 percent. I also looked at this about four years ago which was 2015.
THE BUDGET MESSAGE OF THE PRESIDENT To the Congress of the United States:
In just over 2 years, together with the American people, we have launched an unprecedented economic boom. Since I was elected, we have created more than 5 million new jobs, including half a million manufacturing jobs. Nearly 5 million Americans have been lifted off food stamps. Unemployment is the lowest in nearly half a century. African American unemployment, Hispanic American unemployment, and Asian American unemployment rates have all reached historic lows. Our Nation is experiencing an economic miracle—and it is improving the lives of all our citizens.
We have achieved these extraordinary gains thanks to historic tax cuts and an unprecedented regulatory reduction campaign, through unleashing American energy production, systematically fixing bad trade deals, and remaining absolutely committed to putting the needs of the American worker first.
My Administration worked with the Congress to pass unprecedented legislation to confront the opioid crisis, a sweeping new farm bill, groundbreaking criminal justice reform, major investments to rebuild the military, and historic Department of Veterans Affairs reforms to ensure that our great veterans have access to high quality healthcare.
We are also making our communities safer. To target violent crime, my Administration has increased support for Federal, State, and local law enforcement. We have added nearly 200 new violent crime prosecutors across the United States. And last year, the Department of Justice prosecuted more violent crimes than ever before. As a result, violent crime is falling.
My Administration is confronting the national security and humanitarian crisis on our southern border, and we are accepting the moral duty to create an immigration system that protects the lives and jobs of our citizens. This includes our obligation to the millions of immigrants living in the United States today who followed the rules and respected our laws.
In the 20th century, America saved freedom, transformed science, and defined the middle class standard of living. Now we must write the next chapter of the great American adventure, turbocharging the industries of the future and establishing a new standard of living for the 21st century. An amazing quality of life for all of our citizens is within reach. We can make our communities safer, our families stronger, our culture richer, our faith deeper, and our middle class bigger and more prosperous than ever before.
We are now addressing our challenges from a position of strength. My 2020 Budget builds on the tremendous progress we have made and provides a clear roadmap for the Congress to bring Federal spending and debt under control. We must protect future generations from Washington’s habitual deficit spending.
This year, I asked most executive departments and agencies to cut their budgets by at least 5 percent. In addition to reflecting those reductions, my Budget invests in the following priorities:
Securing our Borders and Protecting our Sovereignty.
As President, my highest duty is the defense of our Nation—which is why finishing the border wall is an urgent national priority. All who are privileged to hold elected office must work together to create an immigration system that promotes wage growth and economic opportunity, while preventing drugs, terrorism, and crime from entering the United States. Immigration policy, like all policy, must serve the interests of Americans living here today—including the millions of new Americans who came here legally to join our national family. The American people are entitled to a strong border that stops illegal immigration, and a responsible visa policy that protects our security and our workforce. My Budget continues to reflect these priorities, and I look forward to working with the Congress to finish the border wall and build a safe, just, and lawful immigration system that will benefit generations of Americans to come.
Preserving Peace through Strength.
A strong military, fully integrated with our allies and all our instruments of power, enables our Nation to deter war, preserve peace, and, if necessary, defeat aggression against United States interests. To that end, my Budget requests $750 billion for national defense, an increase of $34 billion, or 5 percent, from the 2019 enacted level. The Budget funds the National Security Strategy and National Defense Strategy, building on the major gains we have already made throughout the world.
Protecting our Veterans.
Our Nation’s brave warriors and defenders deserve the best care America has to offer—both during and after their active service. Last year, I signed into law the historic VA MISSION Act of 2018 to reform and transform the Department of Veterans Affairs healthcare system into an integrated system for the 21st century. My Budget fully funds all requirements for veterans’ healthcare services and provides additional funding to implement the VA MISSION Act of 2018.
Investing in America’s Students and Workers.
To help protect taxpayer dollars, my Budget continues my request to create an educational finance system that requires postsecondary institutions that accept taxpayer funds to have skin in the game through a student loan risk-sharing program. My Administration will also continue to seek expanded Pell Grant eligibility for high-quality, short-term programs in high-demand fields, so that students and workers can quickly gain valuable skills at a more affordable cost and obtain family-sustaining jobs. We must create and invest in better opportunities for our Nation’s students and job seekers, while ensuring that we do so in a more efficient and effective manner.
Research for Childhood Cancers.
Many childhood cancers have not seen new therapies in decades. My Budget initiates a new effort that invests $500 million over the next 10 years to support this critical life-saving research.
Defeating HIV/AIDS in America.
The HIV epidemic still plagues our Nation, with more than 38,000 Americans infected every year. In response, my Budget provides $291 million to the Department of Health and Human Services to defeat the HIV/AIDS epidemic. The goal is to eliminate most new infections within 5 years (75 percent) and nearly all within 10 years (90 percent). This initiative will focus efforts on diagnosis, prevention, and treatment efforts in the locations where intense transmissions of the virus are driving the epidemic. Confronting the Opioid Epidemic. My Budget continues historic levels of funding for our law enforcement, prevention, and treatment efforts to combat the opioid and drug addiction epidemic.
THE BUDGET FOR FISCAL YEAR 2020 3
Supporting Working Families. America must also lead in supporting the families of our workforce so that they can balance the competing demands of work and family. My Budget includes a one-time, mandatory investment of $1 billion for a competitive fund aimed at supporting underserved populations and stimulating employer investments in child care for working families. My Administration has also pledged to provide paid parental leave to help working parents, and we are committed to partnering with the Congress to enact this important policy.
We must always strive to uphold our oaths to promote and protect the personal and economic freedoms the Constitution guarantees to us all. We must work together to renew the bonds of love and loyalty that link us to one another—as friends, as citizens, as neighbors, as patriots, and as Americans. My Budget reflects my Administration’s commitment to these worthy goals as it seeks to make the United States of America wealthier, stronger, safer, and greater for every American family and neighborhood.
DONALD J. TRUMP
The White House, March 11, 2019